The Organisation for Economic Co-operation and Development (OECD) has said that Portugal could improve the efficiency of its value-added taxes (VAT) and personal income taxes by further reducing exemptions.
The latest OECD Economic Survey Of Portugal welcomed the country’s efforts over the last two years to curb the formerly widespread application of reduced VAT rates and VAT exemptions. However, it noted that the efficiency of the VAT system is still below the OECD average and that further efforts are needed to extend the scope of the standard 23 percent VAT rate. The report recommended abolishing the current intermediate rate of 13 percent and narrowing the scope of the reduced rate of 6 percent.
The OECD also welcomed changes to the taxation of income in kind, which included limiting the favorable taxation of company vehicles to smaller cars, but said that this special treatment should be abolished altogether.
The report also said that there is scope to strengthen environmental taxes, for example by equalizing the tax burden on diesel fuel and petrol and reining in preferential fuel tax rates for agriculture and fishing. It also recommended a carbon tax on sectors not subject to the European Union’s Emission Trading System (ETS).
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